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24 posts categorized "Auto Industry Bail Out"

May 15, 2009

GM Makes Official Statement Regarding Dealer Network Reductions

GM_logo_s Big News Today: In conjunction with conversations General Motors started with its U.S. dealers today, GM issued the following statement:

As noted in our recent S-4 filing and updated Viability Plan, General Motors plans to reduce its dealer network from 5,969 stores today to approximately 3,600 by the end of 2010.

This process starts today, as GM begins contacting dealers regarding its long term planning. Approximately 1,100 underperforming and very small sales volume U.S. dealers will be advised that GM does not see them as part of its dealer network on a long-term basis. In most cases, existing franchise agreements run through October of 2010.

New Saturn Logo In addition, we will be updating about 470 Saturn, HUMMER and Saab dealers on the status of those brands and we will be discussing how the remaining dealers will support our retail plans going forward. While additional cuts will be made, we believe the vast majority, over 90 percent, of the remaining dealers will be offered a chance to remain with GM. However, specific dealer issues, further attrition and additional possible dealer network actions are expected to bring the number of future GM dealers to around 3,600 by the end of 2010, as described in the Plan. The actual number could vary given levels of attrition, etc. outside of GM's control.

"We have said from the beginning that our dealers are not a problem but an asset for General Motors," said Mark LaNeve, GM Vice President of Sales Service and Marketing. "However it is imperative that a healthy, viable GM have a healthy, viable dealer body that can not only survive but prosper during cyclical downturns. It is obvious that almost all parts of GM, including the dealer body, must get smaller and more efficient."

"In response, we are letting them know about our long term plans. GM's viability plan calls for fewer, stronger brands as well as fewer, stronger dealers. We have taken a very difficult step by identifying those dealerships we'd like to keep in the GM dealer network and those with whom we will have to wind down our business relationships," LaNeve said.

2008_hummer_h2 As independently owned businesses, dealer owners will make their own decisions if and when they want to make this information public. GM is not releasing the names of any dealers.

"We are not terminating any dealerships today," LaNeve clarified, "We will be talking to all of our dealers over the next few weeks, letting them know now in the spirit of open communication, so they are advised well in advance, about our long-term plans and their role in them. Long term, GM should have fewer, healthier dealers, maintaining GM's current high customer satisfaction ratings, with more sales per outlet."

Brandy_schaffels_s By Brandy Schaffels Editor

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April 30, 2009

Today's dramatic duo: Chrysler joins Fiat AND declares bankruptcy!

We've been following the "carpocalyse" for months now, watching to see what would happen with automotive giants General Motors and Chrysler. Today's big news came with twice the jaw-dropping effect, as Chrysler announced that it will merge with Italian automaker Fiat, whie also declaring Chapter 11 bankruptcy.

Every automotive website we follow is talking about it, each with their own spin on the circumstances surrounding this monumental arrangement, which according to President Barack Obama "will provide a new lease on life for Chrysler." Here are short summaries of the most important points, from each of the blogs we follow on this subject.

Automotive_traveler Our colleague Rich Truesdell, over at  has posted a blog supplying many of the details on this transition, explaining that Chrysler, Fiat, and the US Treasury will appoint a new board of directors (with six members to be named by the US Government and three by Fiat), which will then appoint a new CEO to replace current CEO Bob Nardelli after he steps down. According to Truesdell, the US Treasury will provide $3.5 billion in debtor-in-possession financing as well as an additional $4.7 billion upon the company's emergence from Chapter 11.  The Fiat-Chrysler partnership is official; Fiat has already agreed to transfer technology and has also agreed to build engines and cars here in North America. Finally, American taxpayers will be repaid before Fiat can increase its initial ownership stake,  Daimler will give up its stake and contribute to pension plan obligations.

Consumer_reports Eric Evarts at Consumer Reports does an excellent job of describing the new arrangements with Fiat, explaining how "a new company will emerge phoenix-like from the Chrysler Corp. ashes, with its autoworkers' Voluntary Employee Beneficiary Association (VEBA) owning 55 percent... Fiat will initially hold a 20 percent ownership stake in Chrysler (without shelling out one single Euro), which may be expanded as government loans are repaid. In the meantime, the U.S. and Canadian governments combined will have a 10 percent stake."

Evarts tell us that most manufacturing operations will be temporarily idled beginning May 4th, though they are expected to resume in 30 to 60 days once the dust has settled and a new company emerges. Apparently, according to Evarts, the combined merger and bankruptcy comes just a few months shy of 30 years after Lee Iacocca saved Chrysler by winning government loan guarantees, on September 7, 1980. 

Continue reading "Today's dramatic duo: Chrysler joins Fiat AND declares bankruptcy!" »

March 31, 2009

Obama says "Jump!" Automakers say "How High?"

Old_car_flickr.com_photos_mcgraths_2431583107 President Obama's announcement on the Auto Industry may have helped clear up some concerns (most notably with tax credits and warranties), but it still has automakers scrambling for additional drastic change. It's a landmark time in our industry, identified by such labels as "cartastrophe" and "carpocalypse"  and even now, those of us in the business are left wondering what our automotive future holds. Car sales have dropped precipitously, with some experts predicting that fewer than 10 million cars could be sold this year, down from 16.5 million just two years ago.

The entire transcript of Monday's speech is available at the New York Times  but I wanted to present some highlights of it here, along with rebuttals and other relevant information from the manufacturers themselves.

Old_car_flickr.com_photos_kb35_2289942750 As we already know, for the last few months, Obama and his Auto Task Force have been reviewing requests by General Motors and Chrysler for additional government assistance, as well as the plans each of these companies has developed to restructure, to modernize, and to make themselves more competitive.

And after all this analysis, President Obama and his Auto Task Force have determined that "neither goes far enough to warrant the substantial new investments that these companies are requesting."

Continue reading "Obama says "Jump!" Automakers say "How High?"" »

February 16, 2009

Drive America Forward: Buy a New Car on Presidents Day

Buyamerican-ad011409 It may be a cliché, but truly, there has never been a better time to buy a car.

Great deals abound and car dealerships are hungry for your business.On average, new vehicles are selling at a discount of 15 percent off the MSRP. Some vehicles are discounted as much as 30 percent. Deals like these truly make it a buyer’s market. But, why else is it a good time to buy?

Purchasing a new car now not only saves you considerable cash, it also helps revive our economy, which depends on car sales. Car dealers and automakers provide hundreds of thousands of jobs, and they generate hundreds of millions of dollars in tax revenue for state and local governments. And now that taxpayer dollars have been loaned to automakers, it is in everyone's best interest for car sales to return to sustainable levels.

We all hold the keys to rebuilding America's economy.

Continue reading "Drive America Forward: Buy a New Car on Presidents Day" »

January 15, 2009

It's a Happy Green World at the 2009 Detroit Auto Show

It was a completely different Auto Show atmosphere in Detroit this week than it was at November's Los Angeles Auto Show,  and we're not talking about the weather.

Dark_dodge_booth_at_LAAS Even though Los Angeles was sunny and Detroit was snowy, the attitudes of show participants were quite the opposite. The Detroit Auto Show was extremely optimistic, thanks to a TARP-funded resuscitation and new plans to create better, greener vehicles. Los Angelinos were so burdened by the weight of potential industry failures that some manufacturers didn't even bother to turn on their display lights.

Even though several manufacturers cut back their complicated displays and presentations, eliminated giveaways, or chose not to participate at all, those who did attend presented a variety of upbeat new perspectives as well as an assortment of new production and concept vehicles driven by new eco-friendly powertrains.

Continue reading "It's a Happy Green World at the 2009 Detroit Auto Show " »

January 06, 2009

NOW is the Perfect Time to Buy a Car!

10_Ford_Shelby_GT500_action_s Regardless of all the doom and gloom you might be hearing about the economy, NOW is the perfect time to buy a new car.

As we enter the new year, automakers are leaving behind one of the most miserable years in their history, reporting dreadful December figures demonstrating double-digit drops in sales as credit markets tightened and consumer confidence sank. Just yesterday, @TomWhiteJr  reported that most auto sales fell around 30 percent (Toyota -36.7%, BMW -35.9%, Honda -34.7%, Ford -34.4%, GM -31.2%, Nissan -30.7%), though Chrysler was hit hardest, with a giant 53.1% drop in vehicles sold in December 2008.

10_Chevrolet_Equinox_s “Why is this good news?” you might ask? It’s not, at least, not exactly. It was not good news for auto dealers who are sitting with unsold inventory on their lots. It was not good news for manufacturers who have had to idle their plants so their dealers can clear out some of that aging inventory. But it is good news for consumers who are ready to buy, because it means those cars are there right now, just waiting for somebody to take them home to a nice warm garage. And tons of deals to encourage consumers to come look at them.

Continue reading "NOW is the Perfect Time to Buy a Car! " »

December 30, 2008

Feel-Good Factoids About Ford

Ford-logo With all the worrisome press about the automotive industry in the news lately, I thought it would be important to share some uplifting news and interesting factoids about our domestic manufacturers.

Ford is perhaps best known for the Mustang, which has now sold more than 9 million units since it was introduced at the New York World's  Fair on April 17, 1964. The Mustang will celebrate its 45th anniversary in 2009, and is one of the most widely recognized vehicles in the world. Today, one of every two sports cars sold in America is a Mustang. The Mustang is also Ford Motor Company's longest-running nameplate.

Mustang_gallopingBut some may not know much more about this domestic brand, which in recent years has become extremely focused on improving quality, fuel economy, technology, safety, and eco-friendliness.

So, let's talk about Ford:

Continue reading "Feel-Good Factoids About Ford " »

December 17, 2008

Chrysler extends Christmas Vacation… er, idles plants

New_chrysler_logo I received this email today, following closely on the heels of a similar announcement from General Motors last week:

“Due to the continued lack of consumer credit for the American car buyer and the resulting dramatic impact it has had on overall industry sales in the United States, Chrysler LLC announced that it will make significant adjustments to the production schedules of its manufacturing operations. In doing so, the Company will keep production and dealer inventory aligned with U.S. market demand. In response, the Company confirmed that all Chrysler manufacturing operations will be idled at the end of the shift Friday, Dec. 19, and impacted employees will not return to work any sooner than Monday, Jan. 19, 2009.

Chrysler dealers confirmed to the Company at a recent meeting at its headquarters, that they have many willing buyers for Chrysler, Jeep, and Dodge vehicles but are unable to close the deals, due to lack of financing. The dealers have stated that they have lost an estimated 20 to 25 percent of their volume because of this credit situation.”

It’s typical in the auto industry to idle plants during the two-week period around the Christmas holidays, but extending the time for an additional two weeks is another reflection on the current economic downturn. According to an article in the New York Times,  Honda has also announced that it will reduce North American production from January through March by 119,000 vehicles.

Continue reading "Chrysler extends Christmas Vacation… er, idles plants" »

December 12, 2008

General Motors Idles Plants, Cuts Production 30 Percent

081212-01-General_Motors_Shreveport_assembly_plant04 General Motors issued a press release today announcing a significant reduction of planned production for the first quarter of 2009 due to the ongoing and severe drop in industry sales, which were down 36 percent in November overall and 41 percent for GM (2007 vs. 2008). The impact of these and recently announced actions to adjust production with market demand will result in the temporary idling of approximately 30 percent of GM's North American assembly plant volume during the first quarter of 2009 and will remove approximately 250,000 units from production.

I'm sure it's only a matter of time before we see similar announcements from other manufacturers. Honestly, with the pileup of imported vehicles from Honda, Mercedes-Benz, Toyota and Volkswagen, sitting in the Port of Long Beach and Port of San Diego,  I'm surprised we haven't seen such announcements from other import manufacturers. Auto sales are at a standstill, and it's not just the domestics who are suffering.

According to General Motors, this is a direct response to the rapidly deteriorating market conditions. The speed and severity of the U.S. auto market's decline has been unprecedented in recent weeks as consumers reel from the collapse of the financial markets and the resulting lack of credit for vehicle financing.

Continue reading "General Motors Idles Plants, Cuts Production 30 Percent" »

Anxiety Over Auto Bailout Spreads Beyond Manufacturers to Suppliers AskPatty has posted several articles recently about the Automotive Industry Bailout. Two of them in which we specifically commented on the potential trickle down  of the disastrous effects that will occur to the smaller companies on which the Big Three rely to produce the nearly 15,000 smaller pieces and parts that go into a single car.

Bill Vlasic and Leslie Wayne of The New York Times have posted an extremely informative and educational story  that explains this in greater detail, in which they state “the hypotheticals about the domino effect of the companies’ troubles through the vast network of auto supplier firms — which employ more than twice as many workers as the carmakers — are becoming real.” I’m summarizing some of it here, but it’s an excellent article. Please read it carefully after you finish reading this. General Motors and Chrysler owe their suppliers nearly $10 billion dollars for such pieces and parts provided by large, publicly held companies that make car seats and axles, to much smaller firms that provide clamps, hoses and stamped metal parts. Many of their suppliers are teetering on the verge of bankruptcy themselves, and do not have the luxury of extending credit much longer.

These same companies provide parts to both domestic and foreign brands with plants in the United States, and when these companies begin to shut down, the flow of parts to every automaker in the country will be disrupted. “There’s no question it will hit Toyota, Honda and Nissan too,” said John Casesa, principal in the auto consulting firm Casesa Shapiro Group.

Continue reading "Anxiety Over Auto Bailout Spreads Beyond Manufacturers to Suppliers " »

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